{"id":29090,"date":"2026-07-07T17:00:04","date_gmt":"2026-07-07T15:00:04","guid":{"rendered":"https:\/\/voelkerrechtsblog.org\/?p=29090"},"modified":"2026-07-09T15:26:49","modified_gmt":"2026-07-09T13:26:49","slug":"winning-at-all-costs","status":"publish","type":"post","link":"https:\/\/voelkerrechtsblog.org\/de\/winning-at-all-costs\/","title":{"rendered":"Winning at All Costs"},"content":{"rendered":"

In his Opinion<\/u><\/a> in the pending NV Reibel vs JSC VO Stankoimport, Case No. C-802\/24\u00a0(\u2018Reibel\u2019) decision, Advocate General Biondi recalled a metaphor: the relationship between European Union (\u2018EU\u2019) law and arbitration is akin to two ships passing at night \u2013 they barely glimpse one another in the darkness while maintaining safe distance, enough to the extent of avoiding collision.\u00a0The imagery echoes to this day. I argue that the distinction between judicial and arbitral decisions in the EU-Russia sanctions package is indefensible under the mandate of the New York Convention and EU public policy.<\/p>\n

Parsing the Sanctions Package<\/strong><\/p>\n

When the European Council adopted Regulation No 269\/2014<\/u><\/a> (\u20182014 Regulation\u2019), freezing of funds was incorporated as a responsive measure against Russia\u2019s actions in Ukraine. This measure entirely blocked access to the assets of any natural or legal person identified in Annex I of the Regulation. Article 5(1)(a), however, carved an exception \u2013 competent authorities of Member States may authorize the release of certain frozen funds that are subject to an arbitral award rendered before the person or entity was listed in Annex I. But judicial decisions are exempt from this temporal restriction \u2013 frozen funds subject to such decisions may be released regardless of when the entity was sanctioned.<\/p>\n

Regulation No 833\/2014<\/u><\/a>\u00a0introduced further restrictive measures, prohibiting transactions with certain Russian entities. In 2022, the Regulation was amended<\/u><\/a> by introducing Article 5aa(3)(g), which prohibited transactions with Russian entities, except where it was \u201cstrictly necessary to ensure access to judicial, administrative or arbitral proceedings in a Member State, as well as for the recognition or enforcement of a judgment or an arbitration award rendered in a Member State<\/em>\u201d. As analyzed<\/u><\/a> by da Silveira and den Hartog, the change placed judicial and arbitral proceedings on the same pedestal. Yet, the temporal restriction with respect to frozen funds still applied.<\/p>\n

On 23 April 2026, the European Council adopted Regulation No 2026\/511<\/u><\/a> (\u20182026 Regulation\u2019), inserting Article 5(c) into the 2014 Regulation. Pursuant to this change, competent authorities of Member States may now authorize the release of certain frozen funds where the arbitral decision concerns the costs of the proceedings, even if it was rendered after the Respondent was listed in Annex I. Even after this amendment, the inequality persists: arbitral awards receive equal treatment only with regard to an award on costs. Such distinction is unjustifiable, especially when the only accessible assets of an entity designated in Annex I are available in EU Member States.<\/p>\n

Understanding<\/strong> the Asymmetry<\/strong><\/p>\n

Consider two creditors. Each holds a fully adversarial, binding claim against the same Russian entity for the same sum arising from the same breach of contract. One creditor brought the claim in an EU national court; the other submitted it to arbitration pursuant to a clause in their commercial contract. Both won. Both now seek to collect from the Respondent\u2019s assets, which have been frozen since the party was designated under EU-Russia sanctions after the proceedings began. The first creditor (litigant) may apply to a competent national authority for the release of frozen funds. However, the victor of the arbitral proceeding can only seek to recover costs (assuming they are awarded) due to Article 5 of Regulation No 269\/2014\u2019s restriction.<\/p>\n

The frozen-fund release under Article 5 is not automatic: it requires an authorization decision by the relevant competent authority in the Member State where enforcement is sought. The authority must be satisfied that\u00a0the award is genuine, the creditor is unconnected to sanctioned persons, and payment does not otherwise benefit designated persons. This check-based mechanism applies to both judicial and arbitral decisions. However, the problematic asymmetry lies not in the safeguard, but in the futility of the creditor\u2019s decision to even apply.<\/p>\n

Article 5(c) of the 2026 Regulation recognizes that a party dragged into arbitration by a sanctioned Claimant, and awarded costs, should be able to recover those costs from the frozen assets of the entity that brought the proceedings. More importantly, the amendment implicitly concedes that the original Article 5 framework was too narrow, as there is no reason to differentiate between a costs award obtained through litigation and the same won in arbitration.<\/p>\n

The NYC Mandate and Public Policy<\/strong><\/p>\n

All EU Member States are parties<\/u><\/a> to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (\u2018NYC\u2019). Article III of the NYC provides that each contracting state shall recognize and enforce arbitral awards in accordance with domestic procedural rules. Further, the provision stipulates that \u201cThere shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards<\/em>\u201d. Based on this, States carry a general, positive, presumptive obligation<\/u><\/a> to recognize and enforce arbitral awards. A fortiori, I posit that derogation from Article 5(c) of the 2014 Regulation will not offend public policy.<\/p>\n

Article V(2)(b) of the New York Convention provides that the recognition and enforcement of an arbitral award may be refused if it violates the public policy of the state in which enforcement is sought. However, Advocate General Biondi\u2019s Opinion in Reibel<\/em> rightly notes that EU and Member States\u2019 public policy is a \u201cshifting concept<\/em>\u201d. A provision may fall within the web of public policy if it is a fundamental principle of the State\u2019s legal order. Regarding Regulation No 833\/2014, the Opinion considers Article 11(1) as a part of EU public policy, since it \u201cseeks to ensure that EU operators will not be exposed to adverse consequences resulting from the change in their legal position following the entry into force of the restrictive measures in respect of Russia<\/em>\u201d. Put simply, Article 11(1) bars the satisfaction of any claims arising from contracts or transactions by sanctioned Russian entities. A claim, as defined in the 2014 Regulation, includes an assertion for the recognition and enforcement of an arbitration award. The question of whether Article 11(1) actually<\/em> forms a part of EU public policy remains pending before the Court of Justice of the European Union.<\/p>\n

However, even a teleological interpretation of Article 5(c) of the 2014 Regulation renders the asymmetry between judicial and arbitral decisions void of meaning. As explained<\/u><\/a> by Dobri\u0107 and Wallner, while interpreting any provision, the European Court of Justice considers both the wording and its purpose to ensure its effectiveness. The purpose<\/u><\/a> of freezing funds is to secure reparations for Ukraine and immobilize Russia\u2019s monetary sources. Article 11(1) prevents sanctioned entities from multiplying claims and from benefiting from their assets to Russia’s benefit. The temporal distinction in Article 5 serves no comparable purpose, particularly not when\u00a0a non-sanctioned party has won arbitration against a sanctioned entity. This leaves the party with only the possibility to recover costs. In\u00a0such cases, public policy is not violated\u00a0as no sanctioned entity is benefited.\u00a0The remedy therefore may be targeted, retaining the temporal asymmetry in Article 5, but only for sanctioned entities that prevail in arbitration. This approach prevents enforcement claims from benefitting Russia after the entity\u2019s designation in Annex I.<\/p>\n

In conclusion, the asymmetry cannot be justified. Two creditors holding the same winning claim against the same frozen assets should not be treated differently simply because one went to court and the other to arbitration. The NYC prohibits it, as Member States must place arbitral awards on the same footing as judicial decisions, not on a narrower one. And EU public policy permits equal treatment \u2014 when a non-sanctioned party defeats a sanctioned entity, releasing those funds takes nothing away from Russia and hands it nothing in return. The answer, then, is not to scrap the temporal limit altogether, but to keep it only where it does real work, i.e., where a sanctioned entity itself would stand to gain. Until then, EU judicial and arbitral decisions will remain like two ships that pass in the dark.<\/p>\n","protected":false},"excerpt":{"rendered":"

In his Opinion in the pending NV Reibel vs JSC VO Stankoimport, Case No. C-802\/24\u00a0(\u2018Reibel\u2019) decision, Advocate General Biondi recalled a metaphor: the relationship between European Union (\u2018EU\u2019) law and arbitration is akin to two ships passing at night \u2013 they barely glimpse one another in the darkness while maintaining safe distance, enough to the […]<\/p>\n","protected":false},"author":35,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6639],"tags":[3640,4836,7055,3597,5678],"authors":[8045],"article-categories":[6000],"doi":[],"class_list":["post-29090","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-arbitration","tag-european-union","tag-litigation","tag-russia","tag-sanctions","authors-mustafa-topiwala","article-categories-article"],"acf":{"subline":"The Unjustified Judicial-Arbitral Decision Asymmetry Under the EU-Russia Sanctions Regime"},"meta_box":{"doi":"10.17176\/20260707-190049-0"},"_links":{"self":[{"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/posts\/29090","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/users\/35"}],"replies":[{"embeddable":true,"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/comments?post=29090"}],"version-history":[{"count":4,"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/posts\/29090\/revisions"}],"predecessor-version":[{"id":29098,"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/posts\/29090\/revisions\/29098"}],"wp:attachment":[{"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/media?parent=29090"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/categories?post=29090"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/tags?post=29090"},{"taxonomy":"authors","embeddable":true,"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/authors?post=29090"},{"taxonomy":"article-categories","embeddable":true,"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/article-categories?post=29090"},{"taxonomy":"doi","embeddable":true,"href":"https:\/\/voelkerrechtsblog.org\/de\/wp-json\/wp\/v2\/doi?post=29090"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}